Incident: The company released its semi-annual report for 2023, achieving operating income of 1,489 million yuan (-63.09%), net profit of 335 million yuan (-71.60%), and net profit of 295 million yuan (-74.01%) after deducting non-return net profit of 295 million yuan (-74.01%). Unconventional business declined somewhat, but regular business growth was strong. On a quarterly basis, Q2 achieved operating income of 657 million yuan (-53.35%), net profit of 131 million yuan (-52.32%), net profit of non-attributable income of 100 million yuan (-57.94%), after deducting non-attributable net profit of 100 million yuan (-57.94%). We expect it to be mainly regular business.
Comment:
In the first half of 2023, the company's chronic disease testing/drug testing/eugenics testing business achieved revenue of 718/164/134 million yuan, respectively, a year-on-year increase of 40.30%/18.11%/5.50%, and the infectious disease business achieved revenue of 428 million yuan. Conventional infectious disease businesses such as respiratory testing, gastrointestinal infectious disease testing, and blood infectious disease testing recovered and increased significantly during the reporting period. The spread of influenza testing products in the first half of the year also led to a sharp increase in the company's influenza testing product sales revenue.
In the first half of 2023, the company's gross margin was 63.55%, an increase of 6.99 pcts over the previous year. We believe that mainly through the optimization of raw materials and the improvement of manufacturing process efficiency, the company achieved results in cost reduction and efficiency. Specifically, the gross margin of infectious disease testing/drug testing/chronic disease testing increased 2.33 pcts/7.69 pcts/8.26 pcts year on year; net interest rate was 22.35%, a year-on-year decrease of 6.77 pcts. We think the main reason is that the revenue scale effect has weakened and the company's overall cost ratio has increased.
The company adheres to the “dual track parallel” R&D strategy of expanding existing product line categories and developing new technology platforms. 23H1 added a total of 22 authorized patents/software copyrights, 10 product registration certificates, and completed 81 new product development and product improvements. In the field of chemiluminescence, the company's single-person chemiluminescence and tubular chemiluminescence products form effective collaboration. The regular project and the special project “walk on two legs”, 23H1 completed the domestic registration of two special projects for new products of eclampsia; in the field of molecular diagnostics, the company's self-developed fully automated nucleic acid amplification analysis system actively helps disease control and customs quarantine; in the field of pathology business, the company develops its own hypersensitive antibodies and full-process supporting reagents. Through scientific research cooperation with the top three hospitals, the company enhances its ability to compete with peers.
Profit forecast: We expect the company's net profit to be 562 million yuan, 761 million yuan, and 973 million yuan respectively from 2023-2025, up -53.0%, 35.3%, and 27.9% year-on-year respectively. We believe that regular business is expected to continue to maintain steady growth along with the upgrading of old business products, the successive launch of new business products, and further channel construction. We gave the company 25-30X PE in 2023, with a corresponding reasonable value range of 31.62-37.95 yuan (corresponding PS is 4.58-5.50X. Refer to comparable companies, we think the valuation is at a reasonable level), and maintain the “superior to market” rating.
Risk warning: Product registration progress falls short of expected risks, new product promotion falls short of expected risks, collection and other policy risks.